India has made enormous strides since
it achieved independence more than 50 years ago. Economic growth
since 1980 has been among the fastest in the world; social indicators
for literacy, education enrollment, disease and mortality, and gender
have steadily improved; and poverty has fallen since the mid-1970s.
has also developed a diversified industrial base and a relatively
large and sophisticated financial sector. Its
software subsector - one of the most dynamic in the world -
has experienced a sustained and rapid upswing, with exports rising
from US$734 million during the 1995-96 fiscal year to US$2,650 million
in fiscal year 1998-99. Software exports are projected at US$3,925
million in fiscal 1999-00, demonstrating the continued strength
of the subsector. These successes have taken place against a backdrop
of India's well-established democratic system - the largest in the
world - which provides its population with a significant degree
of political freedom and stability.
Reducing Poverty and Raising
Improving the living standards of the poor remains one of India's
most pressing challenges. In the early 1950s, nearly half of India's
population was living in poverty. Since then, poverty has been declining,
though slowly, and vast disparities between and within India's 25
states persist. With a gross national product (GNP) per capita of
US$440 in 1999, India continues to have the highest concentration
of poverty of any country, with more than 360 million people - about
36 percent of the population - living below the official poverty
line. Based on an international poverty line 1 , India accounts
for an estimated 40 percent of the world's poor.
Addressing Health and Nutrition Needs
The well-being of India's population has improved since the 1970s.
Average life expectancy at birth has increased from 50 years to
63 today, the infant mortality rate has fallen by half to about
60 per 1,000 live births, and the birthrate has fallen by half to
about 3 children per woman. Yet India's social indicators are poor
by most measures of human development.
national family welfare program has helped move the country about
two-thirds of the way toward its goal of replacement- level fertility
(2.1 births per woman.). However, population growth and the impending
strain on the environment, natural resources, and social services
still pose a threat to India's development. With an estimated population
of 1 billion people, second only to China's, India leads the world
in terms of population growth-currently at 16 million each year.
poses a continuing constraint to India's development. Despite improvements
in health and well-being, malnutrition remains a silent emergency
in India. More than half of all children under the age of four are
malnourished and 30 percent of newborns are significantly underweight.
The World Bank estimates that malnutrition costs India at least
US$10 billion annually in terms of lost productivity, illness, and
death and is seriously retarding improvements in human development.
Despite some improvement, India's women remain significantly more
malnourished than men, and 60 percent of Indian women are anemic.
Bias against women and girls is reflected in the demographic ratio
of 929 females for every 1,000 males. In India, unlike most countries,
more women than men die before the age of 35. India's maternal mortality
rates are very high, particularly in rural areas, ranging from 440
to 580 deaths per 100,000 live births. Maternal deaths in India
account for almost 25 percent of the world's childbirth-related
Although declining, largely preventable diseases such as leprosy,
tuberculosis, cataract blindness, and malaria continue to account
for 50 percent of reported illness, and around 470 deaths per 100,000.
India has the largest remaining pool of polio transmission in the
world. Despite a decade of polio initiatives under India's immunization
program, India accounted for more than two-thirds of polio cases
reported worldwide in 1998.
HIV / AIDS
is a newly emerging threat to India's public health. In India alone,
4 to 5 million people are infected with HIV and the number of new
infections doubles every 14 months. Although the rates in the general
population are still low, in absolute numbers India now has the
largest HIV positive population in the world.
Since 1991, the World Bank has significantly increased its emphasis
on health sector development in India. It has aimed to reduce the
level of deaths, illness, and disability through a two-pronged approach.
First, the World Bank supports high-priority programs to reduce
the spread of significant diseases such as HIV/AIDS, leprosy, tuberculosis,
cataract blindness, and malaria. Second, the World Bank supports
strengthening the performance of state health systems, mainly at
the referral and primary level.
World Bank-assisted Woman and Child
Development Project seeks to improve nutrition policies and programs
and the World Bank is also assisting the government reduce fertility,
stem population growth, and improve women's health through the national
reproductive and child health program and several stand-alone population
projects. The World Bank-supported Reproductive and Child Health
Project and Immunization Project are working to intensify efforts
to eradicate polio and reduce vaccine- preventable diseases.
Access to Education
made modest increases in primary education enrollment rates in the
1990s and today has the world's second largest education system
after China, with 108 million children aged 6-10 attend-ing primary
rise in literacy rates over the last decade is indication of India's
progress in education. From 1991- 99, the overall literacy rate
increased from 52 percent to 64 percent. Yet more than half of Indian
women are still illiterate; about 40 million primary school-age
children are not in school (mostly girls and those from the poorest
and socially-excluded households); and only about one-third of an
age group completes the constitutionally prescribed eight years
of education. India still has much work to do to elevate its human
resources to the levels needed to sustain current economic growth
support India's goal of achieving universal primary education, the
World Bank has been supporting the District Primary Education Program
(DPEP.) This successful program has boosted school enrollment -
particularly among girls and disadvantaged children. Achievement
testing indicates that DPEP is improving the quality of instruction
and learning achievement in the early grades.
World Bank has also provided support to technical and vocational
education. Three recently completed projects in this area helped
boost the quality and efficiency of technical education, and a fourth,
in states not served by the earlier projects, will begin soon. Building
on the successes of previous projects, recently completed studies
of upper primary education is expected to increase future World
Bank involvement at this level of education.
major obstacle to further development lies in India's large central
and state fiscal deficits, which are a risk to macroeconomic stability,
divert funding from the private sector, and hinder financial sector
reform. Since the major adjustment of 1991-93, subsequent deficit
reductions have been limited, leading to a general government fiscal
deficit (comprising the central and state governments) of 9.6 percent
of GDP in 1999-00 - one of the largest fiscal deficits in the world.
the state level, the lack of deficit reduction has put India's poorer
states in an increasingly unsustainable position. The deterioration
in the states' finances has been accompanied by a decline in state
expenditures in critical areas such as health, education, roads,
there has been an increase in spending on loss-making state enterprises
and massive subsidies for power, water, irrigation, and transport.
Some states such as Andhra
Uttar Pradesh, and
have begun to address these problems. Major reasons for the continued
large central and state deficits are the heavy subsidies that encourage
inefficiencies, the narrow tax base, and the cost of the large civil
service. Public sector production remains large in areas where private
production would be more efficient, reflecting limited progress
of the World Bank's programs increasingly rely on the private sector
to assist in the delivery of services. The World Bank aims to promote
efficient private sector development by assisting the government
in identifying the remaining constraints to private investment in
infrastructure. In response to a request from the government, the
World Bank has prepared a Private Infrastructure Framework for India
which identifies existing constraints and makes recommendations
for further policy, regulatory, and financial reforms to facilitate
private investment in infrastructure.
International Finance Corporation (IFC), the World Bank's private
sector lending arm, has been focusing on projects that support private
entry into areas such as infrastructure, banking, insurance, contractual
savings, and the mutual fund industry. Other areas of investment
include agribusiness, health and education, knowledge-based industries,
and development of the small and medium-size enterprise sector.
basic infrastructure services and encouraging greater private sector
participation in telecommunications, electricity, transport, and
water supply can make a major contribution to growth and have been
a major focus of Indian economic policy since the early 1990s.
this progress, the introduction of private capital in key infrastructure
subsectors has been slower than anticipated, as have results. Few
investments have been brought to closure under the new national
policies. Improved sectoral regulatory frameworks and independent
and empowered regulatory authorities would stimulate efficient private
the roads sector, the World Bank is supporting an ambitious program
of highway maintenance and construction at the national and state-level.
The Third National Highways Project was approved in June 2000, with
support from an IBRD loan of US$516 million. This project covers
some of India's least-developed states such as Uttar Pradesh and
Bihar which have almost completely missed out on the recent economic
growth, in part because of poor infrastructure.
The Andhra Pradesh State Highway Project is also the first in a
series of state highway projects aimed at relieving traffic congestion
by widening and upgrading priority roads, enhancing road maintenance,
and strengthening state road agencies' ability to manage road programs
the urban sector, the World Bank is working with a number of state
governments and municipalities to make the urban water sector financially
viable, to help water utilities become commercially-oriented, to
increase private sector competition, and to enhance the delivery
of municipal services.
telecommunications, the World Bank is helping the government to
implement its program of reforms in the sector and establish an
appropriate regulatory framework for opening the sector to competition
from private sector operators. The Telecommunications Sector Reform
Technical Assistance Project, approved in May 2000, will help India
strengthen the regulatory role of government agencies responsible
for the sector and improve the management of the radio frequencies
for radio stations, cellular phones, satellite communications, and
long-distance telephone and data traffic.
growth in India will continue to be hampered as long as poor power
supply constrains industrial development. The heavy financial losses
of the power sector also remain a burden on public sector finances.
Shortages in power are estimated at about 10 percent of total electrical
energy and roughly 20 percent of peak capacity requirements. National
surveys of industrialists consistently rate power supply as one
of their most critical problems. The financial performance of the
power sector is poor, with low economic returns.
government recognizes the need to increase efficiency of power supply,
consumption and appropriate electricity pricing. As responsibility
for electricity supply is constitutionally shared between the central
government and the states, improving power sector structure and
ownership must be targeted at the state level.
states' severe power sector problems are attributed to poor operational
efficiency of the State Electricity Boards (SEBs), which are a key
element of India's power system. Commercial losses of SEBs and State
Generating Companies, which together generate almost 70 percent
of India's electricity supply and provide most of the distribution
to consumers, have reached the equivalent of about US$3 billion
or about 1 percent of India's GDP.
weak financial position of the SEBs also remains a fundamental obstacle
to private sector investment in the power sector. Several states
including Orissa, Andhra Pradesh, Rajasthan, Haryana and Uttar Pradesh
have acknowledged the problems of the SEBs and have initiated comprehensive
power sector reform programs.
World Bank Group's assistance to the power sector focuses on supporting
reforms at the state level to restructure power systems and policies.
This includes tariff reform, incorporation of public utilities,
privatization of power generation and distribution, and independent
State of Orissa pioneered these reforms in 1996 through the Orissa
Power Sector Restructuring Project with the help of a US$350 million
World Bank loan. As a result, a significant portion of the state's
power generation capacity and the entire electricity distribution
system have been privatized.
January 1998, the World Bank approved a US$600 million lending program
to provide support for the implementation of Haryana's power sector
restructuring program. This initiative uses an Adaptable Program
Loan (APL), a new lending instrument which phases lending based
on progress of set goals. The first phase, sup-ported by a US$60
million loan, builds the foundation of a long-term lending partnership
with Haryana by helping to remove the most critical impediments
to power transmission and improving the quality of power supply
to remote areas. However, progress has been sluggish in moving ahead
beyond the initial restructuring of the sector.
World Bank is supporting the first phase of Andhra Pradesh's power
sector restructuring program through a US$210 million loan - the
first in a series of APLs totaling up to US$1 billion that the World
Bank plans to provide over the next eight years. A US$150 million
loan was approved in FY00 to support Uttar Pradesh's ongoing power
sector reforms. Similar operations are planned in other states including
Karnataka and Rajasthan.
75 percent of the population living in rural areas, improving the
efficiency of India's agriculture
is key to attaining high growth and reducing poverty. While India
spends twice as much on agriculture as its East Asian neighbors,
the composition of its public spending is not conducive to faster,
labor-intensive rural growth and poverty reduction.
rural development and poverty reduction requires cutting spending
on poorly targeted input subsidies; investing in rural infrastructure;
providing more effective rural services, especially to the poor
and socially-excluded; improving management of water, forests, and
other natural resources; and liberalizing the rural economy, including
the rural financial system.
Rural development projects constitute the World Bank's largest number
of projects in India's portfolio. Lending and policy discussions
focus on state-level efforts to reduce input subsidies such as water
and power; improve the operation and maintenance of existing facilities;
promote sustainable management of water, forests, and other natural
resources; and improve public spending on the dissemination of agriculture
technology and extension, rural infrastructure, and social safety
nets. At the central level, the World Bank Group is concentrating
it s policy dialogue in reform areas such as food, credit, and fertilizer
policies and centrally sponsored schemes that are critical to the
performance of the rural economy.
Protecting the Environment
India is one of the 12 "megadiversity" countries in the
world that collectively account for 60 to 70 percent of the world's
biodiversity. The biodiversity of India's forests, grasslands, wetlands,
and marine ecosystems faces many pressures. These include air and
water pollution, cattle grazing, deforestation, hunting, exploitation
of non-timber forest products, uncontrolled fires, and intensive
development. India's cities are also beset by environmental hazards,
sanitation problems, and population growth rates twice that of the
The World Bank has supported projects for forestry and biodiversity
protection, soil and water conservation, industrial pollution and
prevention, and sewage disposal and sanitation. The World Bank is
also supporting initiatives to strengthen institutions and agencies
that formulate and implement environ-mental policies and monitor
and enforce environmental legislation. Integration of environmental
concerns into sectoral approaches is a major priority for the World
Bank, such as identifying opportunities to combine environmental
measures with ongoing economic liberalization.
recent years, the World Bank has increased its commitment to social
and environmental concerns in India and has significantly strengthened
the Social Development Unit in its New Delhi office. While progress
has been uneven, involuntary resettlement is being addressed by
helping borrowers with their resettlement policies and programs
and by building their capcity to deliver on these policies.
are also directed at address-ing child labor in World Bank-assisted
projects. In addition to identifying and developing counter-strategies
for projects that may indirectly or directly involve working children,
the World Bank is supporting government efforts to deal with child
labor through World Bank-financed projects.
World Bank continues to support government programs to draw women
into the mainstream of economic activity by improving their access
to resources and services like agriculture extension, and training.
It is also helping to improve the welfare and status of women through
support for family planning, nutrition, health, technical education,
and vocational training.